Reuters Report: China Eyes Yuan-Backed Stablecoins in Global Push to Challenge Dollar Dominance

Following the GENIUS Act in the US, the adoption of stablecoins is continuing. Not only is the use of stablecoins becoming more widespread – for example in the case of Volkswagen Singapore – countries are also increasingly looking to explore ways to offer stablecoins in their own currency.

As reported earlier this week, Japan is likely to approve its first yen-pegged stablecoin later this year. It is expected that Japan’s Financial Services Agency will give the nod of approval to the project which is hoped to stabilise the local financial system.

South Korea is another East Asian nation to investigate a local currency-pegged stablecoin. South Korea’s Financial Services Commission (FSC) is said to produce a bill in tandem with the nation’s Virtual Asset User Protection Act.

The won-pegged stablecoin bill could come as early as October.

China Enters Stablecoin Race

Meanwhile, another East-Asian nation and the world’s second-largest economy, China, is reportedly also entering the stablecoin arena.

Citing sources close to the matter, Reuters reported that China is working toward legalising usage of yuan-backed stablecoins. In a major policy shift, China’s cabinet, the State Council, is working on a road map for enhancing global currency use in an effort to catch up with the advancements on stablecoins.

As per the report, the upcoming roadmap is expected to set targets for expanding yuan use in global markets, define regulatory roles, and include risk-control measures.

Senior leaders will also convene to shape policy on stablecoins, signalling a potential reversal of China’s 2021 ban on crypto activity and a major shift in its digital asset strategy.

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What’s the Thinking Behind Non-USD Stablecoins?

China is also a member of BRICS, a ten-country intergovernmental organisation comprising of Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran and the UAE.

There are a lot of controversies around BRICS online; many believe it’s an alternative to the G7, others think it is an anti-Western and especially anti-American group of countries.

There has been ongoing speculation about whether BRICS would try to weaken the US dollar’s position. Will a yuan-pegged stablecoin be part of this effort?

Whatever camp you’re in, there are other reasons why nations are pursuing their own stablecoins.

As per former Reuters-man, Co-founder and Editor-in-Chief at The Big Whale, Raphaël Bloch, countries want stablecoins for “Rapid, efficient global currency distribution via public blockchains”, he wrote, adding that they’re also eyeing “Effective government debt financing (stablecoin reserves are backed by debt securities).”

Bloch also stressed that the EU risks being left behind, lacking concrete stablecoin plans, while instead focusing on the – generally much disliked – CBDC.

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